India: Imported aluminium scrap offers inch up on rising LME aluminium prices

• Bauxite shortages in Aus, Guinea tighten alumina supply
  
  
• Weak demand affects alloy manufacturers' operations
  
  

Imported aluminium scrap offers in India rose by up to 3.5% w-o-w. Although buying interest was weak, offers increased due to the rise in LME aluminium prices.

BigMint's benchmark assessment for tense scrap originating from the UAE was at $1,790/t, up by 1.7% w-o-w, and for zorba 95/5 from the UK was at $2,090/t, both CFR west coast, India.

Rising LME aluminium prices amid bauxite shortages

At the time of reporting, three-month aluminium futures on the LME climbed up by 5% w-o-w to $2,630/t from the previous week's $2,500/t. Meanwhile, stocks at LME registered warehouses stood at 757,850 t, falling by 1% w-o-w from 769,275 t.

The price increase in aluminium was fuelled by a significant rise in alumina prices, which is used to produce primary aluminium. Alumina supply has tightened due to a bauxite shortage caused by disruptions in Australia and Guinea, with bauxite being the raw ore that is refined into alumina. Additionally, Chinese alumina consumption has been robust this month, as aluminium producers increased their output.

Market insights

A trader mentioned, "Prices are elevated due to the rise in LME levels, but market demand remains weak. Only a few large-scale alloy manufacturers are procuring imported raw materials to fulfil their pre-booked orders. The primary concern is the weaker-than-usual demand across the industry, which is likely to limit any significant price movements."

Meanwhile, the slowdown in the auto sector has impacted demand for imported scrap in the Indian market. With rising inventory build-up among auto companies, the consumption of alloy ingots, particularly ADC12, has declined, putting downward pressure on prices. Due to the lack of aggressive buying from original equipment manufacturers (OEMs), most alloy manufacturers have cut back on raw material procurement and are operating at just 30-40% of capacity, according to market sources.

Additionally, demand from the overseas market, particularly Japan, India's top export destination for ADC12, is yet to recover. As a result, alloyed ingots produced in India are primarily being sold in the domestic market, leading to a surplus of ADC12 ingots amid weak demand.

In the southern market, most participants expect a slowdown in trade activity and demand over the next two months, as the northeast monsoon is yet to arrive. Flooding and operational disruptions may arise in the near term due to the upcoming rainy season.

An alloy manufacturer mentioned, "Currently, there is a lack of confidence in the market, with prices of imported scrap being driven more by LME aluminium prices than by the actual supply-demand dynamics."

China's silicon market

According to BigMint's assessment, prices of China's silicon 553 moved up by $30/t w-o-w to $1,730/t CFR Mundra. Meanwhile, offers from the suppliers' side were at $1,740-1,750/t. However, bids were heard at the lower end, at $1,710-1,720/t.

Prices are rising slightly due to an increase in freights, but demand from India remains weak, particularly due to the underperforming aluminium ADC12 segment.

Additionally, sea freights are currently hovering at $1,700-1,900 for a 20 ft container from China to Mundra.

Domestic scrap prices fall

In the domestic market, tense scrap prices edged up w-o-w in both Delhi and Chennai. According to BigMint's assessment, domestic tense scrap prices stood at INR 172,000/t ex-Delhi NCR and INR 173,000/t ex-Chennai, majorly driven by the rise in LME aluminium prices.

Despite a slight increase in offers for domestic casting scrap in both the northern and southern regions, workable prices remained at INR 170,000-172,000/t in both Delhi and Chennai.

Meanwhile, offers for wheel scrap in Chennai were heard at INR 212,000-214,000/t.

Outlook

In the short term, prices of imported scrap are expected to remain firm due to rising LME levels as an impact of the alumina shortage. Additionally, the upcoming holiday season, including Diwali in India and Christmas in the Western and European regions, typically slows down market activity.